Y376 IPE: Y376 IPE: Oil Politics Oil Politics October 13, 2009 October 13, 2009
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Y376 IPE:Y376 IPE:Oil PoliticsOil Politics
October 13, 2009October 13, 2009
Oil-- Synonymous with Oil-- Synonymous with Advanced Industrialization Advanced Industrialization
and Globalizationand Globalization Essential to industry as:Essential to industry as:
Transport fuelTransport fuel Industrial fuelIndustrial fuel Raw material inputRaw material input
Modern militaries’ most Modern militaries’ most important material:important material: Portable, non-volatile, efficient, Portable, non-volatile, efficient,
easily handledeasily handled Churchill’s decisionChurchill’s decision
The essence of modern The essence of modern geopolitics:geopolitics: Basis of much of modern Basis of much of modern
society (suburbs, mass transit, society (suburbs, mass transit, heating, electricity, industrial heating, electricity, industrial base)base)
““Access” is economic life or Access” is economic life or deathdeath
World Energy World Energy Consumption, 1965-Consumption, 1965-
2005, in Terawatts (TW)2005, in Terawatts (TW)
World Crude Oil World Crude Oil Production and Production and
Consumption, 2003Consumption, 2003
Barrels per day (2003)
11 million
Production
Consumption
Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
Top Consuming Top Consuming Countries, 1960-2005, in Countries, 1960-2005, in Million Barrels per DayMillion Barrels per Day
Figure 9-5. World Consumption of Figure 9-5. World Consumption of Petroleum, 1960-2005, in Millions of Petroleum, 1960-2005, in Millions of
Barrels per DayBarrels per Day
Source: U.S. Department of Energy, Energy Information Agency,International Energy Annual (various years).
OPECOPEC
Organization of Oil Exporting Countries
Table 9-1. Members of OPECTable 9-1. Members of OPEC
Country Membership
Algeria 1969
Angola 2007
Ecuador Rejoined 2008
Indonesia 1962
Iran 1960
Iraq 1960
Kuwait 1960
Libya 1962
Nigeria 1971
Qatar 1961
Saudi Arabia 1960
United Arab Emirates 1967
Venezuela 1960
Major Crude Oil Reserves, Major Crude Oil Reserves, 20062006
Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
OPEC Headquarters, OPEC Headquarters, ViennaVienna
Sheik AhmedZaki Yamani
Figure 9-4. Production of Crude Petroleum by Figure 9-4. Production of Crude Petroleum by OPEC Countries, 1970-2007, in Millions of OPEC Countries, 1970-2007, in Millions of
Barrels per DayBarrels per Day
Source: U.S. Department of Energy, Energy Information Agency,International Energy Annual (various years).
Figure 9-7. OPEC and Non-OPEC Oil Figure 9-7. OPEC and Non-OPEC Oil Production, 1970-2007, in Millions of Barrels Production, 1970-2007, in Millions of Barrels
per Dayper Day
Source: Department of Energy, Energy Information Agency,International Energy Annual (various years).
Non-OPEC Oil Non-OPEC Oil Production, 1900-2003Production, 1900-2003
Middle EastNorth AmericaLatin AmericaAfricaWestern EuropeFormer Soviet UnionPacific Asia
Major Oil Routes & Major Oil Routes & Chokepoints, 2000Chokepoints, 2000
15
10
3
1
Million barrelsper day
Hormuz
MalaccaBab el-Mandab
Suez
Bosphorus
Panama
Source: Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University
Price of Oil, Nominal and Price of Oil, Nominal and Real Real
1861-2006, $ per Barrel1861-2006, $ per Barrel
Source: Wikipedia.
Figure 9-14.Figure 9-14.U.S. Gasoline Prices in Current and U.S. Gasoline Prices in Current and
Constant 2007 Prices, 1919-2007, in Cents Constant 2007 Prices, 1919-2007, in Cents per Gallonper Gallon
Source: Department of Energy, Energy Information Agency,Short Term Energy Outlook, August 2008.
Figure 9-8. U.S. Production, Consumption, and Figure 9-8. U.S. Production, Consumption, and Imports of Crude Petroleum, 1949-2007, in Imports of Crude Petroleum, 1949-2007, in
Millions of Barrels per DayMillions of Barrels per Day
Source: Department of Energy, Energy Information Agency,International Energy Annual (various years).
Real Price of Oil and Real Price of Oil and Major Disruptions in Major Disruptions in
World Oil SupplyWorld Oil Supply
0
10
20
30
40
50
60
70
80
90
$ p
er b
arre
l (20
05 U
S$)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
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An
nu
al D
eman
d In
crea
se in
Mill
brl
s/d
ay
Suez War
OPEC Embargo
6 Days War
Iranian Revolution
Iran / Iraq War
Gulf War
Challenges to the Seven Challenges to the Seven Sisters and the rise of the Sisters and the rise of the
cartel (OPEC)cartel (OPEC) ““Oligopsony = An Oligopsony = An oligopsonyoligopsony is a is a
market form in which the number of buyers in which the number of buyers are small while the number of sellers in theory are small while the number of sellers in theory could be large.”could be large.” The Seven Sisters were also an oligopsony!The Seven Sisters were also an oligopsony!
“ “A A cartelcartel is a group of formally independent is a group of formally independent producers whose goal it is to producers whose goal it is to fix prices, to , to limit limit supply and to limit and to limit competition.”.”
OPEC OPEC was formed in 1960, but its effects was formed in 1960, but its effects were most dramatic in 1974.were most dramatic in 1974.
OPEC sought to counterbalance the Seven OPEC sought to counterbalance the Seven Sisters.Sisters.
Definitions from WikipediaDefinitions from Wikipedia
Conservation Measures Taken Conservation Measures Taken after the Oil Price Shocks of the after the Oil Price Shocks of the
1970s1970s Higher taxes on gasoline and fuel oil Higher taxes on gasoline and fuel oil
in Western Europein Western Europe Fuel efficiency standards for motor Fuel efficiency standards for motor
vehicles in the USvehicles in the US Accelerated adoption of energy-Accelerated adoption of energy-
efficient heating for homes, offices, efficient heating for homes, offices, and factoriesand factories
General substitution of energy-General substitution of energy-conserving technologies for energy-conserving technologies for energy-intensive technologiesintensive technologies
Oil Prices have less impact on US Oil Prices have less impact on US EconomyEconomy
'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '048,000
10,000
12,000
14,000
16,000
18,000
20,000B
TU
's p
er
$ o
f Re
al G
DP
©FactSet Research Systems
The Energy Intensity of Output has Declined Markedly
US Demand for All Fuels
This doesn’t mean the US is consuming less oil,
just that it is more efficient at utilizing oil to produce
A few items of note inA few items of note inthe Politics of Oilthe Politics of Oil
Nasser & the Suez Crisis of 1956Nasser & the Suez Crisis of 1956 Linkage of 1970s oil price shocks to Arab-Linkage of 1970s oil price shocks to Arab-
Israeli conflictIsraeli conflict Invasion of Kuwait linked to Iran-Iraq war Invasion of Kuwait linked to Iran-Iraq war
and resulting decline in Iraqi economyand resulting decline in Iraqi economy Al Qaeda origins in Saudi Arabia and US-Al Qaeda origins in Saudi Arabia and US-
Saudi sponsorship of “mujaheddin” in Saudi sponsorship of “mujaheddin” in AfghanistanAfghanistan
US invasion of Iraq ostensibly to resolve US invasion of Iraq ostensibly to resolve issues unresolved by the war in Kuwaitissues unresolved by the war in Kuwait